Crazy high taxes

[ChimiChangle]

It just doesn't feel right, my taxes are always so high even though my bracket is so low. What's going on? This is literally 50% of my taxable income.

[Vanessa A · Accepted solution]

Are you self-employed?  If so, the Self Employment tax on $25,121 would be $3,536.  Self Employment tax is 15.3% of 92% of your net profit. It is your share and the employers share of Social Security and Medicare taxes.  Since you do not have an employer to pay their share, you are responsible for the entire amount. Then the other $800 would likely be your ordinary income tax which is the federal tax that everyone pays.  For that income amount it would be 10%.  You may also have a  penalty in there for underpayment since you do owe. So if you are self-employed, this amount does appear to make sense. 

 If you are unable to pay your taxes in full, you should still file by April 15th, but you can apply for a payment plan from the IRS.  When you get to the end of TurboTax, prior to hitting file, it will give you the option to apply.  Since it looks like  you did not pay SE Taxes in 2024, and if you plan to do this again in 2025, it may be a good idea to make  quarterly estimated payments to cover your SE taxes of 15.3% to avoid penalties in the future.

[ChimiChangle]

I'm an independent contractor, which I'm learning counts as self-employment. 

[VolvoGirl]

So you filled out Schedule C for it.  You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it.   You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

You should be sending in quarterly estimated payments to cover the tax since you don’t have withholding taken out like from a job W2.. Turbo Tax may have printed them out for next year.

To prepare estimates for next year you start with your current return, (if you can't get back into your return try this, On the Tax Timeline page you have to select Add A State to get back into your return). But be careful not to change anything on your real return.

Go to Federal Taxes or Personal (Home&Business version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

Say No to W4. When you get to the W4 and Estimated Taxes section, say you want to adjust your income to go though all the screens.

Or here are the blank Estimates and instructions (the actual 1040ES forms are at the very bottom so scroll way down)

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2025 Estimate

[AmyC]

Yes. The self-employment tax goes to Medicare and Social Security. With a job, those taxes are taken out and the employer matches it. As a contractor, you must pay both parts. This counts towards disability and retirement with Social Security.

The  federal and state governments expect to receive money each quarter. You are dangerously close to owing over $5k and the IRS starts charging penalties and interest. You need to start making estimated payments each quarter based on your income.

Go to IRS.gov/Account to make payments each quarter. You can set up estimates in the program or figure it out at   Form 1040-ES, Estimated Tax for Individuals.

Reference: 

• Can TurboTax calculate next year's federal estimated taxes?
• Can TurboTax calculate the estimated payments for next year's state taxes?
• Self-Employment Taxes
• Publication 535, Business Expenses